The Howard Hughes Corporation
Q4 2020 Earnings Call Transcript

Published: 26 Feb 2021

[Operator:]

Good day, and welcome to The Howard Hughes Corporation Fourth Quarter 2020 Earnings Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to David Striph. Please go ahead.

[David Striph:]

Good morning, and welcome to The Howard Hughes Corporation's fourth quarter 2020 earnings call. With me today are David O'Reilly, Chief Executive Officer and Interim Chief Financial Officer; Jay Cross, President and Peter Riley, General Counsel.

[David O'Reilly:]

Thank you, Dave, and thank you to everyone for joining us today. Welcome to our fourth quarter 2020 earnings call. Before we begin, I'd like to say I'm extremely pleased that Jay Cross joined us today for his first HHC earnings call. Jay joined us in December as President of the Company and among other things, will be overseeing the development activity in our communities across the country. Previously serving as President of Related Hudson Yards, Jay has a vast amount of experience executing on large-scale mixed-use projects that have transformed communities and generated urban development. Jay's industry knowledge and experience are a perfect match for Howard Hughes, and we're thrilled to have him on board. I also want to quickly touch on the winter storm that occurred last week in Texas. Due to the heavy amount of snow and sustained below freezing temperatures, millions were without power, heat and water for extended periods of time, some being impacted over several days. Our regional team was proactive in preparing for the storm nearly a week in advance, which resulted in minimal damage to our assets in the Houston region. In addition, our accounting and financial reporting teams, which are Houston-based, were able to file our 10-K on time and assist in the preparation for this earnings call. I am so grateful for their efforts.

[Jay Cross:]

Thanks, David, and good morning to everyone on the call. It's a pleasure to be with all of you. When one looks at the quality of the Howard Hughes communities across the country, it's easy to see why our MPCs are consistently ranked among the best places to live. This is first reflected in the growth of new home sales and the fast-paced absorption of our newly completed commercial assets. Just this past month, the Robert Charles Lesser Company released their list of the 50 top-selling master-planned communities in 2020. Summerlin ranked third on the list and was the top-selling MPC in Nevada. Bridgeland ranked ninth in the list and was the highest-ranked MPC in Texas. Additionally, during the year, Niche.com recognized the Woodlands and Columbia as number two and number seven best cities in which to live in America. And finally, Summerlin was named MPC of the Year by the National Home Builders Association. This type of recognition seeks to the quality of our master-planned communities and demand for the excellent homes within them. As our communities continue to grow, additional residents drive demand for additional commercial amenities. To meet this ongoing demand, we delivered six commercial assets in 2020. In the Woodlands, we completed construction at 8770 New Trails, a 180,000 square foot build-to-suit office building for Alight Solutions, Two Lakes Edge, a 386-unit apartment complex in Hughes Landing, and The Lane at Waterway, a 163-unit boutique multifamily properties to held its grand opening this past December. In Downtown Columbia, we delivered our first multifamily asset in the Merriweather District with the introduction of Juniper, a 382-unit project with 57,000 square feet of ground floor retail. We also introduced 11,000 square foot stand-alone building to house the regionally popular Busboys and Poets restaurant.

[David O'Reilly:]

Thanks, Jay. I'm now going to spend a little time going and talking about some more detailed results in each of our operating segments, and then discuss our expectations for each of those operating segments for 2021. I'll then turn to our financial results and balance sheet. As I stated earlier, our MPC segment performed well during the year with strength in both underlying new home sales and land sales. Despite a pause in activity during the second quarter due to stay-at-home orders issued across the country, 253 more homes were sold in 2020 compared to 2019. In the fourth quarter alone, there were a total of 692 new homes sold around our MPCs, a 15% increase compared to the fourth quarter of 2019. Land sales were down 34% in 2020 with 377 acres sold versus 571 acres sold in 2019. Similarly, land sales were lower by 30% in the fourth quarter of 2020 compared to the fourth quarter of 2019. This year-over-year and quarter-over-quarter decline was largely attributed to an outsized year in 2019 as Summerlin closed on large super pad sales in the first quarter that were not repeated in 2020. This decrease drove 2020 MPC EBT $54 million lower compared to the full-year 2019. Despite this decline, MPC EBT of $209 million exceeded our pre-COVID earnings target as we typically expect our MPCs to generate between $180 million and $200 million of EBT in a normalized year as we highlighted on our last fourth quarter's earnings call in 2019. Surpassing this target during a worldwide pandemic truly demonstrates the quality and desirability of the communities we are creating. In Summerlin, new home sales were 8% higher in 2020 versus 2019 and were 21% higher in the fourth quarter of 2020 when compared to the same quarter in 2019. In addition, the price per acre of Summerlin's residential land grew to $272,000 in 2020, an increase of $113,000 or 17% when compared to 2019. This activity demonstrates that while land sales were lower year-over-year, it was not the result of declining homebuyer demand, but merely a timing difference. We continue to see home buyers migrate from high cost states such as California, and the pace of new home sales and the steady increase in price per acre of our land indicates further momentum in 2021. Bridgeland had a monumental year and eclipsed all 2019 results in terms of new home sales, acres sold and price per acre. New home sales in 2020 were 18% higher than 2019, with several record setting months. Bridgeland sold 169 acres of residential land to homebuilders during the year, which represents a 13% increase over 2019. Moreover, the price per acre of Bridgeland's residential land rose from $408,000 in 2019 to $439,000 and 2020, an 8% increase. These results speak to the exceptional quality of this community that will only grow more and more attractive over time. The Woodland Hills experienced significant growth during the year as well as new home sales rose 80% in 2020 compared to 2019, with monthly new home sales records in July and August. During the year, the Woodland Hills sold 56 acres representing a 40% increase from 2019, and the price per acre for residential land increased 12% from $276,000 to $310,000 in 2020. We are very pleased with the performance of our MPCs in 2020 and look forward to another strong year in 2021. Moving onto our operating assets. During the year, our operating asset NOI of $190 million was 11% lower compared to 2019. This decline was due to the performance of our retail, hospitality and ballpark assets that were negatively impacted by the coronavirus. For the fourth quarter of 2020, our NOI of $47 million was largely unchanged from the same period of 2019. This was due to increased NOI generated by our office and multifamily assets as the newly completed developments and the acquisition of The Woodlands Towers were brought online during the year. This was largely offset by a decline in NOI for retail and hospitality. Our operating asset NOI improved 25% sequentially, which was fueled by a 44% increase in retail NOI. We've continued to see notable performance improvements following the low of the second quarter and are hopeful this momentum will carry into 2021. Office NOI rose 37% during the year when compared to 2019 and increased 30% during the fourth quarter of 2020 compared to the same period of 2019. The increase in NOI was in large part due to the acquisition of The Woodlands Towers in December 2019, which generated $27 million of NOI in 2020. Excluding The Woodlands Towers, our office NOI was still higher by 5% when compared to 2019. Overall, our portfolio of office assets performed well during the year with strong rent collections of 97% in the fourth quarter as a result of the high credit quality of our tenants. The NOI from our multifamily properties in 2020 improved modestly by 4% compared to 2019 and rose 50% in the fourth quarter of 2020 versus the fourth quarter of 2019. The pace of lease-up of our newly developed assets has remained strong and was a meaningful driver of the overall contribution of our multifamily NOI. This increase was partially offset by increased concessions at select stabilized assets and negative cash burn at Two Lakes Edge and The Lane at Waterway, which are still in the beginning stages of lease-up. Similar to office, multifamily collections during the fourth quarter remained very strong at 98%. We introduced three new multifamily developments in 2020 and the strong lease-up of those assets solidified our decision to launch three new multifamily projects in 2021. Retail NOI declined from $63 million in 2019 to $40 million in 2020, a 36% drop. Much of this decline was driven by COVID-19. While most of our NOI has steadily increase from the lows of the second quarter, our retail in Ward Village and Outlet Collection at Riverwalk in New Orleans continued to experience low activity at their respective retail locations, as both Hawaii and New Orleans have seen a steep decline in tourism. Excluding Ward Village and the Riverwalk, our NOI only decreased by 19% during the year. During the second quarter, our retail collection fell to 50% as tenants struggled to pay rent at the onset of the pandemic. During that time, we worked with our tenants, and particularly, our small business and local tenants, who needed assistance the most. Rent collections in the third quarter improved to 66% and was furthered in the fourth quarter to 73%. Once tourism returns to Hawaii and New Orleans, we expect retail collections to bounce back to the mid-90s range across our portfolio. We continued to see signs of recovery within our retail portfolio and the sequential NOI increase of 44% speaks to the quality of open-air retail settings which has become increasingly more important to our tenants and customers. During the year, the NOI from our three hotels in the Woodlands fell by $26 million or 90% compared to 2019 as occupancy rates fell drastically due to the virus. During the second quarter, our hotels were forced to suspend operations for an extended period to comply with state issued stay-at-home orders, resulting in a significant hit to NOI. These assets began reopening at a limited capacity throughout the third quarter when we began to see increased activity from weekend vacationers and business travelers. While it was a challenging year for hospitality, our assets were still able to generate a positive NOI of $2.9 million, which shows the progress made by our dedicated team over the last few quarters. Finally, in Downtown Summerlin, our Ballpark reported a net operating loss of $3.6 million in 2020 versus a positive NOI of $8.1 million in 2019. As I mentioned earlier in my opening remarks, the Ballpark was shut down during the year as Minor League Baseball canceled the 2020 season due to COVID-19. This shutdown also had a negative impact on our retailers in Downtown Summerlin, as the fans who would attend these games would visit our nearby shops and restaurants on game days. If the Minor League Baseball returns to a full season this year, we expect the Ballpark to generate north of $8 million in annualized NOI as it did in 2019. Shifting to our Strategic Development segment, we continued to see robust demand for our homes at Ward Village with 302 units sold or under contract in 2020. Although travel restrictions were enacted early on across the state of Hawaii, the pace of sales for available condo units remained strong. As a result of COVID-19, we launched a digital sales platform for virtual condo tours, which greatly improved our sales effort during the year. We topped off Aalii this past July and expect to deliver this 85% pre-sold tower at the end of 2021. Our other tower under construction Koula is well sold at 78% and is expected to be completed in 2022. Both towers are on time and on budget with hard deposits from buyers. Subsequent to year-end, we closed on two condo units at Waiea and one at Anaha, with net sale proceeds of approximately $35 million. With two towers under construction, another in pre-sales and two additional towers in pre-development, our view for the future for Ward Village remains very positive. Please note that year-over-year condominium revenues are not comparable as 2019 revenues included condo tower deliveries from Ke Kilohana and Ae'o, while we do not have any tower deliveries in 2020. The Seaport reported a net operating loss of $17 million in 2020, a decline of 11% compared to 2019. And further decline in NOI was largely attributed to the impact of COVID-19 as businesses were shut down and events were either canceled or postponed throughout New York City. As restrictions ease later in the year and we were able to reopen most of our restaurants at a limited capacity, which included the Fulton, Malibu Farm and Cobble & Co. We took proactive action during the year to adapt to our new environment and launch The Greens, announce two new concepts at the Fulton Market Building and altered space of the Tin Building to incorporate mobile ordering and delivery. I do want to note the cost to complete the Tin Building increased by approximately $20 million during the quarter, primarily related to additional build-out cost that we believe will drive higher returns and increase foot traffic. The increase in cost is primarily attributed to the development of our e-commerce platform to drive take-out and delivery demand, programming of the to incorporate a 12-month outdoor venue, enhance security and COVID-related construction delays. While these updates have resulted in higher costs, the increase in operating scope will drive significant opportunities to maximize revenue with both customers and sponsors at the Tin Building. As Jay mentioned, we are making progress on our proposal for 250 Water Street and look forward to bringing economic development to the area. We continue to keep everyone updated as these plans become a reality. This past year presented many obstacles with the Seaport, but we were able to thoughtfully pivot and continue to build upon our vision of revitalizing this district. We believe the positive results displayed in the second half of 2020 is a great proxy of what we expect to occur in 2021. Our master-planned communities do have another great year in 2021 as the growth in new home sales materializes into land sales over the coming quarters. We expect this activity to result in MPC EBT of $180 million to $200 million, which is consistent with our guidance from last year. We expect our operating assets to recoup most of the NOI loss this past year due to the pandemic and project a $195 million to $205 million of NOI in 2021. The lease-up of our newly developed and acquired assets will drive NOI higher, along with the continuous improvements within our retail and hospitality assets as we anticipate higher rent collections and increased occupancy. Note that our operating asset NOI projections assume the Las Vegas Ballpark will breakeven as we anticipate a Minor League Baseball season in 2021, but are not clear as to the number of games or whether there will be stadium capacity restrictions in place. With the completion of Aalii expected in 2021, we anticipate $100 million to $125 million net profit at Ward Village. This tower is already 85% pre-sold and we are confident we will sell majority of the remaining units by year-end. This projection also includes contribution from the sale of select remaining units at Waiea and Anaha. The cost-cutting initiatives actioned over the last several quarters meaningfully reduced our overhead and have helped streamline our business. We have essentially completed the G&A reduction goal of our transformation plan, and expect our G&A costs in 2021 to range between $80 million and $85 million. The combination of exceptional business performance and cost savings in 2021 will have a meaningful impact on our bottom line and will increase the free cash flow available for accelerating further strategic development opportunities within our core MPCs. Taking a look at GAAP earnings for the 12 months ended December 31, 2020, we reported a net loss of $26.2 million or $0.50 per diluted share compared to net income of $74 million or $1.71 per diluted share in 2019. We completed the fourth quarter with a net loss of $6.6 million or $0.12 per diluted share compared to a net loss of $1.1 million or $0.03 per diluted share for the same period of 2019. The year-over-year and quarter-over-quarter declines were largely due to the impact that coronavirus had in our various business segments included in our MPCs, operating assets and the Seaport, in addition to significantly lower condo sales revenue recognized as 2019 revenues included the closing of Ae'o and Ke Kilohana where we did not close on any condo towers in 2020. This decrease in year-over-year earnings was partially offset by the one-time non-cash gain of $267.5 million related to the deconsolidation of 110 North Wacker in the third quarter of 2020. Subsequent to the quarter-end on February 2, 2021, we closed on a two-tranche bond offering issuing $650 million of senior notes due 2029 at a rate of 4.125% and $650 million of senior notes due 2031 at a rate of 4.375%. The net proceeds of the offering, combined with a portion of cash on hand, will be used to redeem our existing $1 billion of senior notes that were due 2025 at a rate of 5.375%, as well as to repay the $280 million bridge loan for The Woodlands Towers. This bond offering increased our unencumbered book value of assets, further reduced our cost of debt and extended our maturity profile. Our nearest debt maturity is not until October of 2021, which is for only $29 million on a loan and the Outlet Collection at Riverwalk. The asset is currently 87% leased and is one of the few remaining non-core assets left to sell. Our liquidity position is incredibly strong as we closed out the year with $1 billion of cash on hand, $185 million in availability on our lines of credit and only $371 million of net equity requirements for our projects currently under construction. The proactive actions taken over the last year to strengthen our balance sheet leaves us with more than enough liquidity to meet all of our current funding requirements. The results from the quarter and the full year are a reflection of how our irreplaceable assets and unmatched communities can perform both during good and bad economic cycles. Our Company's diversified stream of income, strong balance sheet and self-funding business model helped us navigate through an unprecedented year. We ended 2020 well positioned for accelerated growth as the increase in new home sales, strong absorption of our newly developed assets and robust condo sales velocity solidified our decision to launch 2 million square feet of new developments in 2021. We're looking forward to the year ahead as we continue to successfully grow our communities and unlock value for our shareholders. And we're now going to turn the call over to the Q&A section. I will answer the first few questions that have been generated by Say Technology and will be read by Dave Striph. Dave, can you read the first question?

[A - David Striph:]

Yes. First question is, from supplemental disclosures, it looks like Bridgeland added 722 saleable residential acres in 4Q 2020 versus 3Q 2020 for a 35% increase. What drove this? Was it organic? And can the same inventory addition be replicated in other MPCs over time?

[David O'Reilly:]

Hey, it's a great question and I'm glad you asked that because it is important to note. It is exactly right. The net saleable residential acres did grow this past quarter and over 2020 as we continued to refine our master plan at Bridgeland. And when we have a master plan like Bridgeland and close to 11,000 acres, the initial master plan you have as you think about a 30-year sell out, often changes, morphs - and gets more refined and detailed over time. And that's exactly what happened as we put a very fine pencil and pen to some of the new neighborhoods we expect to open in 2021 and 2022. And as a result, we were able to increase the net saleable acres. This is not uncommon, this happens every couple of years within our master plans. I wouldn't expect this to happen in the Woodlands because we're down to very few acres left. But in Summerlin, especially as we get into the details of Summerlin West, and as we continue to move forward in Bridgeland, we have the opportunity to increase the saleable acres. I think 722 is a meaningful adjustment, I wouldn't expect that to be replicated. But we are always trying to push to make sure that we're maximizing the value of all of our MPCs.

[David Striph:]

The next question, can you elaborate on what drove the 25% decline in other operating rent collections in Q4 versus Q3, even as retail collections improved? Was this mainly attributable to the Aviators, hospitality or other? And do you expect normalization in Q1 2021 going forward?

[David O'Reilly:]

Another good question and I'll hit the end of that first, which is I absolutely expect to get back to normalization because we already have. And it was really a timing difference related to the warehouse – The Woodlands Warehouse, where we had not collected it as of December 31st, but have collected it subsequent to the end of the year. So that collection percentage is already back up to where it was in previous quarters and we expect to maintain that or improve that throughout 2021.

[David Striph:]

Next question is, will you be able to recognize gains from any condo towers in Hawaii this year?

[David O'Reilly:]

As I mentioned in our prepared remarks, we're expecting between $100 million and $125 million of net profitability as we close Aalii at the end of the year. And we're also – had closed a handful of units at Waiea and Anaha, which will be throwing – flowing through the P&L in 1Q.

[David Striph:]

Thanks, David. Next question. Shares were diluted last year to shore up the balance sheet as a result of COVID. Do you have any plans and buying those shares back and continuing the original path of reducing share count to further create shareholder value?

[David O'Reilly:]

Again, it's another great question and one that we focus on a lot, and it really comes down to a capital allocation decision. And this past quarter, about a month ago, you saw our announcement to launch 2 million square feet of new development because we thought that that was going to deliver the highest risk-adjusted returns for our shareholders. We have the benefit now of having tremendous liquidity and the optionality of thinking about new developments or thinking about potential share repurchases, which we're always evaluating and we'll take advantage of if we continue to see dislocation in our share price.

[David Striph:]

Thank you. All right. Next question. The development potential in Downtown Columbia, Merriweather, seems very exciting, but perhaps at least talked about by management. Is it because of the size, enormous scale of the other projects or just too early in the process of the Columbia development to really divulge?

[David O'Reilly:]

Well, I'm almost a little offended because I think I go out of my way in most of our investor meetings to highlight Columbia, but it's often overlooked. But it is a great question and we are really excited about the progress in Downtown Columbia. It has been one of the best performers throughout our portfolio during the pandemic, largely driven by an incredible tenant base concentrated in education, healthcare and cyber security. And I noted in an interview earlier this month that in the time it took us to consolidate ownership and reach a tentative agreement on the redevelopment of Landmark Mall, we executed on over $1 billion of transformation in Downtown Columbia, and we're really excited about the momentum we have there. As Jay mentioned, we just launched another multifamily project and we're continuing to see great results in Columbia.

[David Striph:]

Thanks, David. Next question is, as new Internet technologies like SpaceX Starlink enable high paying jobs relocate to the most remote locations, how will urban areas where HHC focuses be able to thrive as more and more high paying jobs exit cities?

[David O'Reilly:]

Well, I would say that we have been a great beneficiary of this trend. And as more and more folks are able to work remotely and as they're able to make decisions on where they live, that allows them to move to great master-planned communities like The Woodlands, like Bridgeland, like Summerlin, where they have an amenity-rich environment, but also access to wide-open green spaces. That has really played in our favor. And we saw that with the increase in home sales throughout our MPCs in 2020 compared to 2019, as well as the rapid lease-up of our multifamily assets throughout the year. So I think that we have been at the center of the bullseye of this trend and we're hopeful that that will continue throughout 2021.

[David Striph:]

Similar question, how is Howard Hughes capitalizing on the surge in demand for real estate, specifically in states like Texas and Florida right now?

[David O'Reilly:]

It comes down to the core of our business plan that as we sell more homes, we sell more land to homebuilders. Those homes get built, residents move in and they need more commercial amenities, and we build those at outsized risk-adjusted returns, as we did with the 2 million square feet of new properties that we will be building this year.

[David Striph:]

Operator, we can open up to Q&A now.

[Operator:]

Thank you. Our first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

[Alexander Goldfarb:]

Hey, good morning. Good morning, David and Jay. So certainly a strong land sales quarter and maybe we'll start there. David, you always mentioned that land sales are lumpy and there's always timing of when the homebuilders take down the land, when they cross and when they come back to the well to buy more. You did mention the $180 million to $200 million. But just given what seems to be incredible pace that's not letting up of homebuilder – of homebuilder activity, how should we think about 2021, so that we don't get detached from what you guys have? Should we just continue to assume the same $180 million, $200 million ratably through the year or are there some super pad sales that you're seeing, or what's a better way that we can sort of be more in sync? Which really means to say, you had a great quarter, in the fourth quarter, does that mean 1Q is going to be light, but then expect 2Q to be big? Just sort of looking for color.

[David O'Reilly:]

It's a good question, Alex. And it's a really difficult one to answer because it requires a lot more clarity in my crystal ball than I have. I would tell you that we feel good that over the course of the year, we'll be able to achieve that $180 million to $200 million number, which is a tremendous number for Howard Hughes. The timing of that is going to be lumpy. And as you know, we're driven by maximizing value and not driven by quarterly results. So, if it comes time to close and we are going to get an incremental benefit of a couple of dollars by waiting till the end of the quarter or by getting it done earlier in the quarter, we're going to do that to maximize value, not to meet quarterly expectations or results. So that's really difficult for me to tell you that, that 1Q will be big or small or 2Q will be big or small. I think in totality, on a trailing 12-month basis, I think we'll look back a year from now and be in that $180 million to $200 million range, hopefully, toward the higher end, but the color quarter to quarter is just too hard to predict.

[Alexander Goldfarb:]

Okay. The second question is, Hawaii, the Ward Village just remains a blow-out success for you guys. But just speaking, some of that – well, REITs on the island, it seems that the housing boom has also arrived in Hawaii, so a lot of locals are buying homes. How has this changed? I mean, basically, it doesn't seem like this shift of the locals to go buy homes instead of condos has really impacted you guys. Is that a fair assessment or are there some things to think about or added dynamics that are more than offsetting any decline in local activity?

[David O'Reilly:]

Well, I think that we haven't seen a shift over the course of the year in terms of the makeup of our buyers. And if anything, we've seen a modest decrease in the local buyers buying condos at Ward Village. Now that's been more than offset with increased demand from the Mainland from primarily the West Coast up and down from the Southern California areas to the Pacific Northwest. But it's been small ships and it hasn't been meaningful changes. I wouldn't say that we've seen an acceleration of local buyers. I think the local economy in Hawaii, which has obviously been incredibly challenged given its reliance on travel and tourism, provided a little bit of headwinds. And I think that's why some of those local buyers were a little bit slower in 2020 than in previous years.

[Alexander Goldfarb:]

Okay. Do you expect the local buyers to come back or you expect just continued more demand from the West Coast?

[David O'Reilly:]

I would expect both. I'm optimistic for both Alex. And I'm optimistic for both, not just in Ward Village but across our master plans. And we had incredible home sales in The Woodlands and in Summerlin and in Bridgeland, with some headwinds in the local economy as Vegas was challenged as the strip had much less travel and tourism. And Houston, which is typically correlated with energy, had its share of headwinds. And we more than offset that with out-of-state migration patterns coming into these master plans, and we were able to continue to see those trends as well as the recovery of those local economies both here in the Mainland as well as in Ward. We could be positioned for an incredible year.

[Alexander Goldfarb:]

Okay. And then just finally to Texas, and I think this may have sort of been following up one of the electronically submitted questions. You guys have two rather large parcels of land, Circle T and Monarch City. And I know, David, that you're always – you don't want to over-promise, you want to under-promise and over-deliver. But are you in general seeing more and more RFPs for corporate relocations that means that some of these land parcels could come to fruition in the next 12 – call it 12 to 24 months? Or is the mantra still don't even think about these lands and about anything happening on these parcels for a long time? Just trying to gauge, just given with all the corporate relocations, it would seem that those two parcels are increasingly likely to see something bite.

[David O'Reilly:]

Look, it's always a possibility, Alex. I wouldn't say that I would look at it as something that we're expecting in the next several quarters. Both of those assets that you mentioned are on the non-core asset list. They're always assets that we're evaluating to sell out. And one of those, Circle T, we did close on the sell out recently. So the remaining Dallas area land that we own is Monarch City, I think it's in the path of growth. I just don't know if that path is near-term enough that I would expect anything in 2021.

[Alexander Goldfarb:]

Okay, thank you. Thank you, David.

[David O'Reilly:]

Thanks, Alex. Appreciate it.

[Operator:]

Our next question comes from Hamed Khorsand with BWS. Please go ahead.

[Vahid Khorsand:]

Good morning. Thanks for taking the question. This is Vahid actually. I know you had announced your ramping up development just recently. But I was wondering, in the past, like you had purchased the two Oxy towers. What are your plans? And why wouldn't it be in your plans to purchase more assets within the MPC regions to increase control over pricing?

[David O'Reilly:]

Well, I think that we're always evaluating those opportunities when they come up. And as you know, we do own a meaningful component of assets within our master-planned communities. And so therefore, those opportunities are limited by definition. But when they do arrive, we take a very close look at them, often given some of our rights whether their rights of first offer, refusal, deed restrictions or otherwise, it can translate into some sense of competitive advantage. And when we do have that, we look to take advantage of it. But those opportunities, historically speaking, have been fewer and far between because we do already have a meaningful ownership percentage in the – of the assets within our master plans.

[Vahid Khorsand:]

Thank you for that. And then my last question, back to the ballpark. We left off last year, I don't remember, a clarification on whether you were able to collect the entire naming rights fee and if those negotiations have progressed on this year? And whether if there is a Minor League Baseball season or if it's a limited number of games or fan attendance, if you would still receive 100% of the sponsorship fee?

[David O'Reilly:]

Well, the naming rights agreement, we very much – we did collect our sponsorship payment specifically to that agreement this past year and we do expect that we will receive it in the future assuming that there is a season, fans or no fans. Now that...

[Vahid Khorsand:]

Okay. Thank you very much.

[David O'Reilly:]

Sponsorship agreements, obviously, there are some that we don't – that aren't – we are not afforded the luxury of collecting whether or not we have a season or not. And in those situations, we worked collaboratively as we have with like our local retail tenants to make sure that we're coming up with a solution that works for both parties.

[Vahid Khorsand:]

Okay. Thank you very much.

[David O'Reilly:]

Thank you.

[Operator:]

Your next question comes from Marlane Pereiro with Bank of America. Please go ahead.

[Marlane Pereiro:]

Hi, thank you for taking my questions. Two just very quick high-level questions. One, any impact on the business from what's going on in Texas right now? And two, obviously, rates are a bit topical in the market this week. Any thoughts on that in terms of impacts on home or land sales?

[David O'Reilly:]

Absolutely, Marlane, and great questions. And I'd day that the team did an incredible job getting prepared for the winter storms as we did see coming and minimized the amount of damage and impact that we saw to our assets to a handful of first pipes, which have all been remediated and we're handling with this – with our insurance company already. So I would say no material impact. Obviously, there was a material impact for all of our employees that lost their power and water, and we did everything we could to help them through that time, opening up our hotels, providing meals, showers, anything we could to help. In terms of interest rates, absolutely, something that we keep a very close eye on. And in the fourth quarter of 2019, we also saw quick meaningful increase in rates, and that had a very temporary short-term impact on home sales. Now, our strategy has always been to only sell land to homebuilders to keep up with underlying home sales, so that we keep up with an equilibrium of supply and demand in the market. If this change in rates impacts home sales, we're going to react quickly and it will impact our land sales. Obviously, it's very much real time and less than 24 hours old, so we haven't seen any impact yet, but it's something that we're going to continue to monitor to make sure that we are able to react very quickly, so that we don't fall out of balance between land that the homebuilders own and home sales that are supporting those – that land.

[Marlane Pereiro:]

Great. Thank you.

[David O'Reilly:]

Thank you, Marlane.

[Operator:]

Our next question comes from Jon Petersen with Jefferies. Please go ahead.

[Jon Petersen:]

Great, thanks. Curious, being just we're two months into the new year, if you can give us any indications of how hotel revenue and NOI is trending and kind of what your expectations are for the next few quarters. And I guess, kind of following up on the recent cold in Texas, has that, I guess, created any incremental hotel demand that might be meaningful to next quarter's earnings?

[David O'Reilly:]

The answer is, in big picture away from the storm, I would expect the next several quarters for our hospitality assets to look like the past couple of quarters. We're still seeing modestly growing leisure travel and modestly growing business travel. Some of the benefits we saw in 2Q and 3Q with some staycationers and the Major League Baseball bubble, obviously we're not going to replicate that in the winter months here. But we did see a pick up over the past week as our hotels were completely sold out during the winter storms. And I think that will have a very modest impact because that is a two- to three-day phenomenon over a 90-day quarter.

[Jon Petersen:]

Got it. And then on Pages 13 and 14 you have kind of your stabilized properties and your current cash NOI and what the stabilized NOI is. I was wondering if you can give us kind of a sense of when we go from that, we're a $192 million annualized in the fourth quarter, you guys have stabilized pegged at about $285 million. I know you guys aren't really giving guidance, but is – if we're looking at a year from now at 4Q 2021, do you anticipate we'll be a lot closer to that stabilized number?

[David O'Reilly:]

I absolutely do. I think that we work every day to try to close that gap, specifically within our stabilized properties on those pages that you mentioned, Jon. And rather than try to give you an indication of where I expect us to be a year from now, I may say if you went back to 4Q last year or 1Q this year pre-pandemic, I think you see that that gap candidly almost didn't exist in hospitality, multifamily and office, and we had a very small gap within retail. So we've shown that we're able to get to that stabilized number. And I think as we hopefully recover coming out of the pandemic, that gap will continue to close back to where it was previously.

[Jon Petersen:]

Okay. All right. That's great. Thank you. Appreciate the color.

[David O'Reilly:]

Thank you. Appreciate it.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to David O'Reilly for any closing remarks.

[David O'Reilly:]

Appreciate everyone joining us today, and I want to thank everyone again for participating in the call. We'll be sure to keep you posted on the progress on our recently announced development plans as well as, as we announce details of an upcoming Investor Day event in the next couple of months. So until then, stay safe and well. Look forward to speaking with you all soon.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.